Tuesday, December 11, 2007

Adam Smith Was Not Schizophrenic!

Bert Olivier writes ‘Neo-what?’ in ‘Thought Leader’ Mail & Guardian Online (here) which is a mix of philosophy, 'poststructuralist' (?) thinking and economics. However, it is woefully misleading on Adam Smith:

“Sure, as one commentator pointed out correctly, Smith was first and foremost a “moral philosopher” (a discipline which he taught at Glasgow), but that does not change the fact that his concern with political economy (that is, with the public world of humans’ economic behaviour) increasingly dominated his thoughts, rather than the “private” domain of morals.

The advice, to read Smith’s The Theory of Moral Sentiments (1759), presumably to discover the “real” Adam Smith, may be well-intended, but does not appear to take into account the marked contrast between that work on moral philosophy and the later work on economics, The Wealth of Nations (1776), as far as so-called “self-love” is concerned.

In the former, Smith sides with thinkers like Shaftesbury in attributing sympathy and fellow-feeling to human beings, rather than to regard self-love, as Mandeville did (rather cynically), as fundamental to all other sentiments. But in the latter work, which is not concerned with (private) moral action, but with public economic activity, albeit on the part of individuals, Smith seemed only too aware that people are generally intent on their own economic interests or gain; that is, they usually behave economically on the basis of “self-love”.

To put it differently in poststructuralist terms, what may seem like an outright contradiction in Smith’s work — between his emphasis on sympathy and fellow-feeling as motivation for moral action on the one hand, and self-love as incentive for economic activity on the other — may be regarded not as a contradiction, but as proceeding along the trajectories of different, incompatible logics, both of which have validity in their respective spheres.

Parallel to Newton’s mechanistic interpretation of nature in terms of immutable “laws”, various 18th-century thinkers interpreted different domains in a similar manner as “naturally” governed by “laws” peculiar to those spheres. So, for example, Voltaire understood society as an embodiment of nature and culture in equal measure, and Adam Smith thought of economic processes and activities as being governed “naturally” by an “invisible hand”, and therefore best left alone (laissez-faire) by the state, to run by themselves.

Hence the term “liberal” — this economic theory is predicated on the assumption that the economy should be left “free” in the form of “free trade” or a “free market”, and — correlatively — economic agents should be given the “liberty” to pursue their own economic interests, without any impediments in the guise of monopolies, cartels and the like (which makes a mockery of Opec, a cartel, today, of course, given its supposed functioning in the context of a “free” market). In this way, Smith believed, the nation would benefit collectively from the (rather selfish) pursuit of economic gain by every individual economic agent.”

CommentThe belief that Adam Smith changed his mind between sympathy in Moral Sentiments and self interest in Wealth Of Nations is a misunderstanding of both. He didn’t.

He lectured in Edinburgh (1748-51) and then Glasgow (1751-64) using much the same material over 16 years. He lectured on moral sentiments (his ethics course) and jurisprudence (his history, law and economics course) in parallel and much of the latter appeared verbatim in Wealth Of Nations.

The gap between publication of Moral sentiments and Wealth Of Nations – 17 years – is misleading, if that is interpreted that the latter is completely different from the former. Those who argue that is have not read his 1762-3 Lectures on Jurisprudence (discovered in 1895 and 1958 respectively).

They are also at variance with what he contains in Wealth Of Nations, usually used to show ‘benevolence’ in Moral Sentiments and ‘self interest’ in Wealth Of Nations, when both were part of his lectures at Glasgow and appear in Wealth Of Nations verbatim in Chapters 1 and 2 of Book I (from Lectures in Jurisprudence given in 1762-3).

In Moral Sentiments (TMS II.i.1-10 & II.ii.1-11; pp 78-91) justice takes priority over beneficence, itself derived from sympathy. Smith shows that society cannot survive without justice but it can survive ‘without any mutual love or affection’ (p86). It is a misreading of Adam Smith to assert otherwise, and it would be contrary to the evidence of the real world to suggest that there was a natural, all embracing and enduring harmony necessary for a society’s survival.

Whatever the claims to the contrary, ‘post structuralist’ or whatever, the supposed different Adam Smith in Moral Sentiments and in Wealth Of Nations did not exist. He was not a schizophrenic! He didn’t teach one thing to his class on Mondays and something entirely different on Fridays.

Let me quote from Moral Sentiments:

‘It is thus that man, who can subsist only in society, was fitted by nature to that situation for which he was made. All the members of human society stand in need of each others assistance, and are likewise exposed to mutual injuries. Where the necessary assistance is reciprocally afforded from love, from gratitude, from friendship, and esteem, the society flourishes and is happy. All the different members of it are bound together by the agreeable bands of love and affection, and are, as it were, drawn to one common centre of mutual good offices.

But though the necessary assistance should not be afforded from such generous and disinterested motives, though among the different members of the society there should be no mutual love and affection, the society, though less happy and agreeable, will not necessarily be dissolved. Society may subsist among different men, as among different merchants, from a sense of its utility, without any mutual love or affection; and though no man in it should owe any obligation, or be bound in gratitude to any other, it may still be upheld by a mercenary exchange of good offices according to an agreed valuation.’ (TMS II.ii.3.1-2: pp85-86)

Given interdependence of each on others, many, probably most, of whom we are unlikely ever to know, it is well that we can benefit from their actions without it being necessary for the happy bonds of ‘mutual love and affection’ to exist among us.

We only ever know a few of our relatives; cousins twice removed are usually strangers of whom we may know nothing at all. Our circle of friends is also limited, and while our acquaintances are a larger set of people, they are still dwarfed in numbers by the billions on the planet (even the millions in our respective countries’ or even those who live in the same town).

When Smith was teaching his classes, using materials that appeared in Wealth of Nations 17 years later, he focused on this factor in human life and explained how people could be in complex exchange links many intersections long and could still benefit from countless transactions among millions of strangers with whom feelings of ‘mutual love and affection’ were not realistic nor necessary. The key was the 'mercenary exchange of good offices' (TMS), or market-based exchanges, as elaborated in Wealth Of Nations.

Bert Olivier does not yet understand what Adam Smith was getting at, but he will if he re-reads the texts (not some isolated quotations) and takes in the seamless continuity of Adam Smith’s works.